Correlation Between First Majestic and Neo Battery

Can any of the company-specific risk be diversified away by investing in both First Majestic and Neo Battery at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Majestic and Neo Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Majestic Silver and Neo Battery Materials, you can compare the effects of market volatilities on First Majestic and Neo Battery and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Majestic with a short position of Neo Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Neo Battery.

Diversification Opportunities for First Majestic and Neo Battery

-0.09

Correlation Coefficient

First Majestic  Neo Battery

Good diversification

The 3 months correlation between First and Neo is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Neo Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Battery Materials and First Majestic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Majestic Silver are associated (or correlated) with Neo Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Battery Materials has no effect on the direction of First Majestic i.e., First Majestic and Neo Battery go up and down completely randomly.

Pair Corralation between First Majestic and Neo Battery

Assuming the 90 days horizon First Majestic Silver is expected to generate 0.89 times more return on investment than Neo Battery. However, First Majestic Silver is 1.13 times less risky than Neo Battery. It trades about 0.11 of its potential returns per unit of risk. Neo Battery Materials is currently generating about 0.02 per unit of risk. If you would invest  798.00  in First Majestic Silver on December 25, 2024 and sell it today you would earn a total of  198.00  from holding First Majestic Silver or generate 24.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Majestic Silver  vs.  Neo Battery Materials

First Majestic Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Majestic displayed solid returns over the last few months and may actually be approaching a breakup point.

Neo Battery Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neo Battery Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Neo Battery is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Majestic and Neo Battery

The main advantage of trading using opposite First Majestic and Neo Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic position performs unexpectedly, Neo Battery can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Neo Battery will offset losses from the drop in Neo Battery's long position.

The idea behind First Majestic Silver and Neo Battery Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..